EA Buys PopCap Games in Deal Worth Up to $1.3 Billion

By AJ Glasser Comment

Rumors of PopCap Games acquisition today are confirmed as EA announces its purchase of the casual games developer for $750 million, plus earn out that could bring it up to $1.3 billion. The deal was first reported by TechCrunch a few weeks ago.

According to the press release issued by EA, the deal is scheduled to close in August. Its impact on EA’s fiscal 2012 results increases Q1 guidance from a range of $500 million to $525 million versus the original range of $460 million to $500 million of non-GAAP revenue. For the full-year non-GAAP guidance, EA is amending its original figures of $3.75 billion to $3.95 billion to a range of $3.8 billion to $4.025 billion to account for PopCap’s contributions to the remainder of the fiscal year.

During a press conference call on the matter, EA CEO John Riccitiello and CFO Eric Brown joined PopCap CEO David Roberts in laying out the strategy behind the deal and what we can expect from it.

On the money side, the bottom line is that PopCap — while expensive — is worth the money. It relieves EA of the burden of creating new intellectual property for casual games, it strengthens EA’s content offerings on Origin and Pogo, and it cements EA’s position on Facebook as the number two developer behind Zynga. EA expects PopCap to be accretive 10 cents or greater in fiscal year 2013. The brunt of the costs for the acquisition will show up in Q2 FY 2012, when EA was already planning on taking a hit in marketing costs for big-ticket Q3 game releases.

On the content side, EA believes its doing PopCap a favor by outsourcing certain parts of the development process (such as updating games for new mobile devices) to its other studios. This frees up the creative people at PopCap to actually be creative in developing new games or new IP. EA also brings additional support to PopCap in Asia, where the casual games developer recently launched its Plants vs. Zombies franchise on social network Renren.

Now that PopCap belongs to a public company, we expect to get a better look at its earnings — particularly broken out by platform. No new information on PopCap’s revenues for 2010 or 2011 were provided on this call and Riccitiello declined to get into specifics, citing EA’s upcoming earnings call as the source for that information. As for clues to upcoming PopCap game releases in social and mobile, Riccitiello says that fear of ambush prevents them from discussing any title releases in detail.

“For good or for bad, our proposition going forward is to provide less visibility on what’s in the mobile social pipeline,” he says.